Tax season: What the IRS says clients and advisors can expect

Taxpayers can expect a smooth filing season despite monumental challenges in getting pandemic relief to millions of people, according to the nation’s top tax official.

IRS Commissioner Charles Rettig told a virtual event held Jan. 17 by the New York City Bar Association that the annual season “is going seamless.” With two rounds of stimulus checks already sent out and a third tranche on tap under President Biden, Rettig said that “we still are in the trenches, moving through.” He added, “I’m not going to say we have our hands full — we’ve got this."

The IRS opened the annual tax filing season on Feb. 12, after pushing back its traditional start in late January to cope with sending out the latest round of stimulus checks to Americans and to accommodate regulations related to the two pandemic relief bills. Rettig said that on opening day, the agency processed 13.5 million returns.

The nation’s tax collector, long the butt of criticism for its glitchy work in prior years, has had its workload doubled with the relief payments, which it’s responsible for getting to taxpayers. The second, most recent stimulus package, approved last December, sent up to $600 to taxpayers (up to $1,200 for married couples) over January and February, plus an extra $600 for children. The first package, part of the giant Coronavirus Aid, Relief, and Economic Security (CARES) bill passed last March, sent up to $1,200 (up to $2,400 for married couples), depending on their income in 2018 or 2019, plus an extra $500 for each child.

More changes might emerge from Biden’s proposed plan, a $1.9 trillion package, with $1,400 stimulus payments ($2,800 for married couples), that is working its way through Congress and is expected to land on the president’s desk for signature by March 14.

Payments under Biden’s plan would have a new formula and yet-to-be-decided income limits at which they would phase out, both of which can proportionally alter the amount taxpayers would receive compared to their previous checks. 

Separately, Democratic lawmakers have proposed legislation that would erase the taxes owed on up to $10,200 in unemployment benefits for this filing year, but it’s not known if that would make its way into Biden’s package — and thus into tax regulations that the IRS will have to deal with.